DEVELOPING RENEWABLE ENERGY IN ARCTIC AND SUB-ARCTIC REGIONS AND COMMUNITIES

RECOMMENDATION #10:
DEVELOP BETTER ACCESS TO CAPITAL AT MULTIPLE SCALES
RATIONALE AND BACKGROUND
| DEVELOPING RENEWABLE ENERGY IN THE ARCTIC AND SUB-ARTIC
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The availability of capital that meets the needs of the particular project under
consideration is critical, especially if there is a desire to develop projects under
community ownership or PPPs. Accessible information about available financing
tools allows potential borrowers to select the option that best suits their needs.
Typically, there are several different financing options and programs available,
and navigating between these and understanding their specific goals and
limitations can be challenging. In some cases, the lending needs associated
with community-scale projects in remote, northern, or indigenous communities
are unique. Traditional project financing can sometimes be difficult to access
for a project(s) based in these communities because it can be more difficult to
demonstrate sufficient collateral, future cash flow, and a high probability of
being able to repay the loan, thus making project financing higher risk from the
perspective of traditional institutional lenders.
CURRENT EXAMPLES
Alaska’s Power Project Loan Fund Program is administered by the Alaska
Energy Authority, and is specifically designed to meeting the lending needs of
small projects and remote communities. PPLF loans can be used to fund the
development or upgrade of small-scale (less than 10 MW) conventional power
facilities, and alternative energy generation facilities (no size limitation). Energy
conservation, heat recovery, reconnaissance or feasibility studies, transmission
and distribution, and bulk fuel storage are also eligible loan uses. The maximum
term of the loan is the useful life of the project up to 50 years. Although there are
no minimum or maximum amounts, loans exceeding $5 million require legislative
authorization. Interest rates range between federal tax-exempt rates and zero.
Local utilities, local governments, and independent power producers are eligible
to apply. The PPLF is unusually accommodating regarding terms, interest rates,
and collateral requirements. As intended, a wide range of projects have been
funded in communities of all sizes, including diesel powerhouse construction
and bulk fuel storage facilities, as well as various renewable energy projects.
There are several existing permanent and temporary financial support
mechanisms available in the Arctic countries. For instance, the Alaska Industrial
Development and Export Authority (AIDEA) provides various means of financing
and assistance, including loan, fund, and guarantee options for renewable
projects. In Canada, none of the current funding programs, such as ecoEnergy
Innovation Initiative, Clean Energy Fund, or ecoENERGY for Renewable Power
are taking new proposals. The Program of Energy Research and Development